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03/18/2007

How to Use Pensions to Improve Judicial Tenure-Becker

Posner shows that salaries of federal judges are low compared to those of lawyers in private practice or academia, and judges' salaries have declined substantially over time relative to earnings of practitioners and law professors. This would imply that being a judge is now less attractive than in the past, but it does not imply that judges are underpaid. For one thing, the number of lawyers has increased greatly over time relative to the number of federal judges, so only a smaller fraction of the stock of good lawyers has to be attracted to the federal bench than in the past.
Underpaid jobs by definition have difficulty attracting and holding high quality workers. Posner's evidence indicates that resignation rates of federal judges are low, not high. It would be useful to know whether the quality of judicial opinions have declined over time, for that would be a way to determine whether the quality of judges has declined. One-way to measure whether quality has declined is to determine the trend in the frequency with which higher courts overturn the opinions of district and circuit judges, but that approach would have to hold constant both the difficulty of the cases and also the quality of the judges doing the overturning.
I believe that given Posner's discussion of judges' salaries, a high priority should be given not to adjusting their salaries, but to raising their pensions to induce more of them to retire before they are too old and have served 25, 30, or more years. Supreme Court Justices now serve an average of 26 years, and retire on average at age 80. I argued in an earlier post (see Becker, March 12, 2005) that lifetime tenure for Supreme Court Justices and federal judges is undesirable precisely because few judges resign. Low rates of resignations combined with large improvements in life expectancy mean that all federal judges, not just Supreme Court Justices, tend to stay on the bench for decades. The framers of the United States Constitution could not have foreseen the very large increases in tenure of judges when they stipulated that members of the Supreme Court would have lifetime tenure.
Judges who stay for decades run the risk of becoming isolated and out of touch with newer issues. Moreover, judges who are incompetent or lose their mental facilities can stay on for many years. Term limits for judges would be a good solution to such excessive tenure of many judges, but that would require a constitutional amendment for Supreme Court Justices, and would be politically difficult to implement for other federal judges. A different approach would be to employ the carrot instead of the stick, and use financial incentives to induce more judges to retire at reasonable ages. Posner indicates that judges already have generous pensions and health benefits, but their pensions can be made still more generous.
Suppose pensions were improved so that judges could retire after age 70, and/or after a certain number of years on the bench, at an annual pension that is 150 per cent of their salaries as active judges. A circuit judge would then receive about $250,000 per year if he retired and only $175,100 if he continues. That is likely to influence the retirement decisions of many judges. If a 50 percent retirement premium were too weak an incentive, the premium could be made larger. The financial burden on the federal budget of even large increases in the pensions of judges would be minor since judicial salaries are a tiny fraction of the budget.
Another way to encourage earlier retirement of judges would be to offer them several years of income as a bonus if they retire at say age 70, or after 15-20 years or so of service. Bonuses to encourage professors to retire were introduced by many universities after a federal law in the early 1990's prevented these institutions from forcing professors to retire. Data for the University of Chicago and other universities suggest that some 30 per cent of professors who reach their sixties accept a bonus of about two years salary plus medical benefits to retire then.
For most occupations it would not be wise to have pensions that are multiples of salaries. But judges are unusual since they have de facto lifetime tenure, and many of them do continue to serve for many decades until they are in their late 70's or 80's. Very high retirement pensions for federal judges seem to be a good way to induce them to retire at reasonable ages and lengths of tenure.

Comments

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This post incorrectly states that the Constitution requires life tenure only for the justices of the Supreme Court, but not for the judges of the lower federal courts. That's wrong. The Constitution also mandates life tenure for the District and Circuit judges.

This is a fascinating subject. I do believe there could be a concern about judges who stay on forever.

If the comparison is between the salaries of judges and the salaries of first year associates,
is there an argument that the first year associates salaries are comparatively too high,
rather than that the judges salaries are
comparatively too low?

If first year associate salaries were too high, we would expect the market to correct them downward. We can't expect that for judgeships since there's only only purchaser of judges (the government).

It's unlikely in my opinion that first year associate salaries are too high since unlike many other professions they are so well known. The easy availability of information would suggest that the market for first year associates is close to perfect.

"If first year associate salaries were too high, we would expect the market to correct them downward .... The easy availability of information would suggest that the market for first year associates is close to perfect."

Well, yes, we would expect a correction, but the Market is highly regulated. Law schools & bar exams strictly limit how many people can enter the profession on short notice [3, 4 years] in response to higher wages. And increasing capacity is close to impossible, since current law schools have a huge advantage over new ones. Additionally, lawyers aren't exposed to foreign competition - it's impossible to study American law anywhere else in the world and then compete with Americans, which, for a lot of the grunt work, is very much technologically possible. This pains me as an economist but makes me happy as an imminent first year associate.

Haris, It's interesting to speculate on the degree to which lawyering can be outsourced.

A few years ago several universities considered whether there was any future for engineering departments here as so much of that work is being outsourced with much of the slack taken up by H1-Visa employees coming to the US.

In some ways law seems teed up to follow as it's costly piece work and the prospect of productivity gains are slim to none. As you mention "doing the grunt work" would be the beginning. Then, what of corporate law and international law? Advisers would not have to be licensed by the American bar. That could set things up for one ABA licensee using a staff of much lower paid "grunters".

As you probably know, England has two castes of lawyers; barristers who are trial lawyers, and solicitors who draw up contracts etc. It's not hard to imagine insurance companies leading the way with some sort of assembly line law with only a small percentage of cases actually going to go to court.

You do have the advantage of the ABA being such a strong union in the US but that very same protectionism could be the seeds of its destruction as well. It's not too hard to imagine huge divorce or bankruptcy mills with all the "grunt" outsourced and with one attorney signing the motions.

Where would the grunt workers come from? Well, some place where English is spoken, there's some tradition of English law, and where there is an infinite supply of labor willing to work for a fraction of US wages. Kinda looks like India and parts of Africa for now with China coming on later?

I think the premise of Becker's post -- that the Constitution mandates lifetime tenure for federal judges -- is mistaken. The Constitution says that judges "shall hold their offices during good behaviour." That means they can't be fired during their term of office unless they display bad behavior, but it does not require a particular term length.

We could (and should) have non-renewable fixed terms for judges -- say, 20 years or so. Doing so would implicate none of the concerns about judges succumbing to outside pressures, and it would alleviate the currently existing incentive to nominate very young lawyers.

There are some fairly high incentives for a judge to retire before he's "too old". Consider, the following pays half his salary for not working and the amount increases by 2% each year of additional employment. So, like other retirement eligible folk he's working for half pay or less. Wouldn't we expect most to either retire at a reasonable age or take their retirement and spend a few years adding "Federal Judge" status to a private firm?

You become eligible to receive a service retirement annuity in three ways:

* At age 65 with 10 years creditable service and currently holding a judicial office;
* At age 65 with 12 years creditable service, whether or not you hold a judicial office;
* At any age with 20 years service, whether or not you hold a judicial office; or
* Served at least 12 years on an appellate court and the sum of your age and amount of service credit in the retirement system equals or exceeds the number 70, whether or not you currently hold office.

Most due diligence work, for example, can be done by anyone with a US-style legal education, and undoubtedly some others. Other than a good command of English, I don't think much more is necessary. A common law history might be helpful, but I doubt it's required, as long as there is competent faculty. I'd have to say India would be the frontrunner for such services, but with English education being what it is in Eastern Europe and the sheer amount of international transactions emanating from Western Europe is putting them into a pretty good position. I really don't think that US law firms will have to/want to pay first year associates six figure salaries to read documents than can be emailed costlessly to someone who is competent enough and much cheaper. Not really sure what the repercussions of this would be on US lawyers in the long run, and I am too distracted by Georgetown vs UNC to think about it.